A Cautious, Laser Focus Rules the Day for Silicon Valley Startups

In 2015, many analysts, tech executives, and venture capitalists predicted that the inevitable burst of the Silicon Valley bubble would arrive in 2016. While the projected apocalypse has yet to arrive, the doomsday prophecies have successfully propelled many startup CEOs toward practical measures to streamline product function, cut overspending, and construct safety nets for the future.

As startups enter this new post-boom, pre-crash era, many have re-focused their efforts on more streamlined service offerings. Rather than continuing to expand their already unwieldy product portfolios, startups have begun to hone their expertise, identifying a core service or product with the power to entice venture capitalists and consumers alike. “Funding for just anything under the sun has gone away,” said Benchmark venture capitalist Bill Gurley to the New York Times of his dire 2015 prediction. He doesn’t regret the industry-wide cost-saving spree he helped to ignite: “I spoke out because the longer those things go on, the worse things end up later on. This is the impact I wanted to have.”

Evernote and the 5 Percent Problem

Shortly after its launch in 2008, note-taking app Evernote was the darling of Silicon Valley. After a stratospheric rise, the company enjoyed a $1 billion valuation in 2013 — but things were about to take a turn. In an interview with Venture Beat, then-CEO Phil Libin hinted at what would ultimately become the company’s biggest obstacle, saying: “’What winds up happening at Evernote conferences is that people go and they say, ‘Oh, I love Evernote and I’ve been using it for years and now I realize I’ve only been using it for 5 percent of what it can do… And the problem is that it’s a different 5 percent for everyone. If everyone just found the same 5 percent, then we’d just cut the other 95 percent and save ourselves a lot of money.”

Evernote had spread itself too thin, and consumer focus had gotten lost in the mix. In fact, the app had so many features that it could sometimes be difficult to explain to newcomers exactly what it was. The company’s cumbersome elevator pitch had become a lengthy and unfocused how-to seminar.

A Cautionary Tale

Over the past year, Evernote has made strategic cutbacks, reduced headcount, and simplified its product line. Libin stepped down in 2015, and the company has since stabilized its bottom line. According to the New York Times, the number of customers who pay for its file storage and sharing product is on track to grow as much as 40% this year, and the company is once again hiring.

While Evernote may ultimately bounce back from its brush with overextension, the 5 percent problem offers a valuable lesson on the importance of maintaining a core identity as you build new features and products. “The Silicon Valley mentality fosters a desire to continue building and iterating because if you don’t, you could get lapped by some new competitor who comes along and outflanks you,” says Venture Beat. In a high pressure growth environment, it makes sense that product developers and engineers would train their focus on the next groundbreaking innovation, losing sight of a strategic big picture.

While no one can predict precisely if and when the Silicon Valley bubble will burst, Evernote’s fall from grace and modest resurrection serve as a cautionary tale to other companies still operating fast and loose. Startup CEOs, marketers, and engineers alike would do well to consolidate their core product offerings, streamline brand messaging, and tighten their belts.

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Author Grace Stearns

A graduate of Pepperdine University, Grace has worked in PR and brand communications at publishing giants like Condé Nast, Hearst Magazines Digital Media, and Simon & Schuster. She writes about content marketing, social media, and technology for L&T's blog. A reluctant West Coast transplant, Grace lives in Brooklyn and spends a majority of her free time curled up with a good book.